Life Tech to Redeem Notes - Analyst Blog


Life Technologies Corporation ( LIFE ) has decided to redeem $450 million of 1.5% convertible senior notes due 2024 on February 15, 2012. The company announced that the notes tendered will be converted at a rate of 19.603 shares of common stock per $1,000 principal amount of the notes. At the end of the most recent quarter, Life Technologies had $2.7 billion of notes consisting of convertible debt of $450 million and senior notes of $2.3 billion.

Life Technologies had $636 million of cash and short-term investments at the end of the last reported quarter compared with $565 million in the year-ago period. The company generated free cash flow of $142 million during the quarter (cash from operating activities of $174 million and capital expenditures of $32 million) with 8.6% return on invested capital ("ROIC"). The company reiterated its target of achieving 10% ROIC by 2012.

Over the past twelve months, the share price of Life Technologies dropped by almost 17.6% to the current level of $46.07. Despite the strong position enjoyed by the company in the life sciences market, challenges remain in the form of tighter budgets for academic and government funded research in both the US and Europe, a trend that is expected to continue. These factors took its toll on the industry and other players such as Thermo Fisher Scientific ( TMO ) and Illumina ( ILMN ) were not left unscathed. The stock retains a Zacks #4 Rank (Sell) in the short term.

However, the New Year began with some cheer as Life Technologies unveiled the Benchtop Ion Proton Sequencer, priced at $149,000, at the Consumer Electronics Show in Las Vegas. The company is already taking orders for the same, which is expected to hit the market in mid-2012. Based on the next generation semiconductor technology the device will be able to sequence the entire human genome in one day for $1,000. The stock price of the company has gone up by 18.4% in 2012.

The significance of this advanced technology can be gauged by the fact that three major research institutions have already signed up for multiple Ion Proton Sequencers - the Baylor College of Medicine, the Yale School of Medicine and the Broad Institute.

Although the company does not expect the current challenging scenario to worsen in the near future, it is repositioning itself for a slower growth environment by lowering its cost structure and focusing on R&D initiatives. Over the long term, we maintain our Neutral recommendation on Life Technologies.

ILLUMINA INC ( ILMN ): Free Stock Analysis Report
LIFE TECHNOLOGS ( LIFE ): Free Stock Analysis Report

THERMO FISHER ( TMO ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: ILMN , LIFE , TMO

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